How Far Back Can the CRA Audit? Statute-Barred Years

How far back can the CRA audit or reassess my business income tax return?

The CRA can reassess an income tax year only within its normal reassessment period, unless an exception applies: three years for an individual or a Canadian-controlled private corporation (CCPC), four years for any other corporation. The period runs from the day the CRA sent the original notice of assessment (Income Tax Act, s. 152(3.1); CRA: when we reassess your T2 return). When it ends and no exception applies, the year is statute-barred.

The CRA can ask about an older year, but it can change the tax only inside this period or under an exception below. An audit that finds more tax ends in a reassessment, so the period decides which years an audit can change.

To test one year:

1. Find the date on the original notice of assessment, or on the first "no tax payable" notice if it came first.
2. Add three years for an individual or a CCPC, four years for any other corporation.
3. If that date has passed, check for a signed waiver, a CRA finding of misrepresentation or a listed matter (below).
4. Check GST/HST separately; it has its own clock.

What makes a case not simple:

• A CRA letter, a buyer or a lender points at a year that looks closed, or the CRA asks you to sign a waiver. The notice dates, CCPC status, which tax is involved and the wording of any waiver decide the answer.
• Income tax, GST/HST and payroll each follow their own rules, and every tax year has its own dates.
• A misrepresentation or a waiver filed in time can reopen a closed year for the matters involved.
• A year that was never filed or never assessed may have no clock running.
• The CRA does not administer Quebec or Alberta corporate income tax (CRA: provincial and territorial corporation tax), so this page does not cover their limits.

Gather every notice of assessment and reassessment with its date, any waiver you signed, any CRA letter, and the date you filed each return.

Is it three years or four for a corporation, a sole proprietor or a partner?

A corporation has three years if it is a CCPC at the end of the tax year being reassessed, and four years if it is not. A sole proprietor or partner has three years on the personal return (Income Tax Act, s. 152(3.1)).

Status is tested at each year-end, so one corporation can have a three-year year and, after foreign investors take control, a four-year year. See losing CCPC status to foreign investors.

A partnership has its own, separate clock. The CRA can determine the partnership's income or loss for a fiscal period within three years after the later of the partnership information return's due date and the day it was filed (Income Tax Act, s. 152(1.4); CRA: T5013 guide). That determination binds each partner, and the CRA may then assess a partner for a year that looks closed, as needed to give effect to it, within one year after the objection and appeal rights end (Income Tax Act, s. 152(1.7)). One member who is designated on the partnership return, or authorised by the partnership, can waive the determination period for all (s. 152(1.9)). Otherwise each partner's personal return keeps its own period.

When does the clock start, and does a later reassessment restart it?

The clock starts the day the CRA sends the original notice of assessment for the year, or the original notice that no tax is payable if that came first. A later reassessment does not restart it (Income Tax Act, s. 152(3.1)). The CRA's audit manual says a new assessment does not extend the normal reassessment period (CRA: Income Tax Audit Manual, chapter 11).

• A return filed late generally starts its clock late, because the first notice comes later, unless the CRA already sent an estimated notice for that year; that notice starts it.
• The CRA has to make the reassessment inside the period. A proposal letter is not a reassessment and does not extend the period; a waiver filed in time does.

When does the time limit stop protecting me?

The CRA can reassess after the normal period in three main situations (Income Tax Act, s. 152(4)). The Act adds narrower ones, such as a reassessment that carries a loss back from a later year.

• Misrepresentation or fraud. The taxpayer, or the person who filed the return, made a misrepresentation attributable to neglect, carelessness or wilful default, or committed fraud, in filing the return or supplying information. There is then no end date.
• A waiver. A waiver was filed within the normal period (next sections).
• Listed matters. The Act gives the CRA an extra three years for foreign-related matters it lists, such as a transaction with a non-resident the taxpayer does not deal with at arm's length, or a foreign-property form (T1135) that was not filed on time or left out required information while income from that property went unreported. See foreign property and affiliate reporting. An unreported disposition of real property is another (for a corporation or partnership, only capital property, not inventory): the Act counts that period from the day the disposition is later reported and states no end for one never reported (Income Tax Act, s. 152(4)(b.3)). It lists other matters too, some with longer periods or periods that run from the day a form is filed.

Section 152 does not define neglect or carelessness, so whether a mistake counts depends on the facts. The CRA's audit manual says neglect or carelessness is enough, without fraud, and that the burden of establishing the misrepresentation lies with the CRA on an appeal (CRA: Income Tax Audit Manual, chapter 11).

If the limit has passed, can the CRA still change part of the year?

Usually only the part tied to the reason it is reopened. After the normal period, the CRA may reassess only to the extent the change can reasonably be regarded as relating to the misrepresentation or to the matter specified in the waiver (Income Tax Act, s. 152(4.01)). The CRA's audit manual says other adjustments, not attributable to fraud or misrepresentation, cannot be included. Subsection 152(4.01) also ties most listed matters to that matter, but it does not cover the foreign-property form extension in paragraph 152(4)(b.2), so that extension is not limited by it.

For misrepresentation and waivers, the rest of the year stays closed.

What is a waiver (Form T2029), and what does signing it change?

A waiver is a form you file that lets the CRA reassess a year after the normal period ends, for the matters written on it, with no end date until you revoke it. Not signing one does not extend the CRA's deadline. For income tax it is Form T2029 (CRA: Form T2029).

• Who asks. The Act makes a waiver the taxpayer's own filing. The CRA's audit manual says that when the CRA proposes an adjustment it may request a waiver, but that it will not ask for one solely to keep a year open.
• When it counts. A normal-period waiver must be filed before that period ends; the audit manual says a later one is not valid. For certain listed matters, a waiver may instead be filed within three years after the normal period ends (the form's second box).
• What it must say. The form requires the matters being waived to be specified, and it must not state a time limit. A taxpayer, legal representative or, for a corporation, an authorized officer signs it.
• How to revoke. File Form T652. Revocation takes effect six months after it is filed (Income Tax Act, s. 152(4.1)).

The wording of the matter line sets how much of the year the CRA can reach, so the line is worth reading against the CRA's proposal before it is signed.

What about a year I never filed, or one the CRA never assessed?

Such a year may not be closed. The normal period is counted from the original notice of assessment, so the question for such a year is whether the CRA has ever sent one. The Act says liability for tax is not affected by the fact that no assessment has been made, and it lets the CRA assess when no return was filed (Income Tax Act, s. 152(3) and (7)). The CRA's unfiled-returns page states no look-back limit (CRA: unfiled tax returns).

If the CRA has already sent an estimated notice of assessment for an unfiled year, the period counts from that notice's date (Income Tax Act, s. 152(3.1) and (7)). For GST/HST, the four years count from the later of the due date and the filing date, so a return never filed gives the Act no filing date to count from. See catching up on unfiled corporate returns and unfiled GST/HST returns and estimated assessments.

How far back can the CRA go on GST/HST?

For a GST/HST return, the CRA generally cannot assess net tax for a reporting period more than four years after the later of the day the return was due and the day it was filed (Excise Tax Act, s. 298(1)). This is a separate clock from income tax. In Quebec, Revenu Québec generally administers the GST/HST and receives the returns of a business located there (CRA: RC4022); this page does not cover Quebec administration or QST.

A GST/HST assessment of a matter may be made at any time if the person made a misrepresentation attributable to neglect, carelessness or wilful default about it, committed fraud, or has a waiver in effect (Excise Tax Act, s. 298(4)). A waiver on Form GST145 must be filed within the normal limit and name the matter.

Rebates, other taxes and some special cases follow different periods in section 298. For GST/HST reviews, credits and rebate claims, see GST/HST reviews and audits.

How long must I keep records, and can the CRA still ask for a closed year's?

Keep books and supporting documents for six years from the end of the last tax year they relate to, which is usually longer than the normal reassessment period (Income Tax Act, s. 230(4); CRA: IC78-10R5). A year reopened by misrepresentation or a waiver, or never assessed, can stay open longer, and the CRA can require by registered letter that you keep records for a longer period it names (s. 230(7)). The detail, including late returns and appeals, is in how long to keep business records.

Section 231.1 lets the CRA examine any document that may be relevant to a taxpayer's obligations or entitlements, and its wording sets no year limit (Income Tax Act, s. 231.1). The CRA's audit manual says the return for a year in which a loss is applied can be reassessed to reduce an overstated loss carry-over (CRA: Income Tax Audit Manual, section 11.3.3). A closed year's records can therefore matter when its loss is used in an open year, or when a waiver or misrepresentation reopens it. For what a receipt must show, see CRA receipt requirements.

Example

These examples are illustrative. Dollar amounts are Canadian.

A CCPC and a closed year

An Ontario CCPC's T2 for the year ended December 31, 2022 was assessed in June 2023 (the notice was sent that month). The three-year period ended in June 2026. The CRA now proposes to add C$60,000 of sales to that year. The proposal is out of time unless an exception applies: the CRA shows a misrepresentation attributable to neglect, carelessness, wilful default or fraud, the corporation filed a waiver before June 2026, or a listed matter is involved. If one does, the CRA can generally add only amounts that relate to it.

The same dates for a foreign-owned subsidiary

A subsidiary of a foreign parent is not a CCPC. Its T2 for the year ended December 31, 2022 was assessed in August 2023. The four-year period runs to August 2027. A CCPC with the same notice date reached the end of its three years in August 2026.

One year, two clocks

A sole proprietor's personal return for 2022 was assessed in May 2023, so its three-year period ended in May 2026. The GST/HST return for the quarter ended December 31, 2022 was due January 31, 2023 and filed February 15, 2023. The four years count from the later date, so the CRA generally cannot assess that period's net tax after February 15, 2027. With no exception or waiver, the income tax year is closed on these dates and that GST/HST period is still open.

Different for you?

• A CRA letter, a buyer or a lender points at a year that looks closed, or the CRA asks you to sign a waiver: the answer depends on the notice dates, CCPC status, which tax is involved and what a waiver would cover. See reviews, audits and voluntary disclosure. Gather the notices, any waiver and the CRA letter for corporate tax help, or individual tax help for a sole proprietor's or partner's personal return, before you sign or reply.
• Years were never filed or never assessed: no clock may be running. See catching up on unfiled corporate returns and get corporate tax help.
• The books for an open year are incomplete or missing: see catching up on overdue books and get bookkeeping help.
• You want penalties and interest on an old year cancelled: relief reaches back 10 calendar years, counted from the tax year for penalties and from when it accrued for interest (CRA: IC07-1R1). See penalties, interest and relief.
• You want to know what makes the CRA pick a business for audit: see what triggers a CRA audit.
• The CRA reassessed and you need to record it: see recording CRA reassessments and penalties.
• The CRA is examining payroll or ruling on a worker's status: payroll follows its own rules. See payroll audits and worker-status rulings.